Creditors Allege Penney Violated Debt Terms

By

Mike Spector And

Dana Mattioli

Updated Feb. 4, 2013 7:25 p.m. ET

A group of hedge-fund creditors sent J.C. Penney Co. a notice alleging the retailer violated the terms of its bonds held by them when it pledged inventory as collateral for a $1.5 billion credit line last year.

The company "strongly believes the Notice of Default is invalid and utterly without merit," J.C. Penney said in a statement Monday. It is fighting the matter in court.